Iphostrou and Iphostrou & Ors (No 4)
[2011] FamCA 220
•31 March 2011
FAMILY COURT OF AUSTRALIA
| IPHOSTROU & IPHOSTROU AND ORS (NO 4) | [2011] FamCA 220 |
| FAMILY LAW - COURTS AND JUDGES – Bias – Disqualification – Where the applicants requested that the primary judge recuse himself on the ground of apprehended bias in the form of prejudgment – Where prior to the application separate applicants had brought an application for disqualification – Whether the primary judge should recuse himself due to apprehended bias |
| Family Law Act 1975 (Cth), ss 79, 80, 106B |
| Australian National Industries v Spedley Securities (in Liq) & Ors (1992) 26 NSWLR 411, discussed Iphostrou & Iphostrou and Ors (No. 2) [2011] FamCA 84, related Iphostrou & Iphostrou and Ors [2011] FamCA 20, related Iphostrou & Iphostrou and Ors (No. 4) [2010] FamCA 1183, related Johnson v Johnson (2000) 201 CLR 488; [2010] HCA 48, applied |
| APPLICANT WIFE: | Ms E Iphostrou |
| 1ST RESPONDENT HUSBAND: | Mr S Iphostrou |
| 2ND RESPONDENT: | Mr P Iphostrou |
| 3RD RESPONDENT: | Mr J Iphostrou |
| 4TH RESPONDENT: | Mr V |
| 8TH RESPONDENT: | J Pty Ltd |
| 12TH RESPONDENT: | P Pty Ltd |
| REMAINING RESPONDENTS: | Corporate entities (Referred to in annexure attached) |
| FILE NUMBER: | MLC | 8731 | of | 2009 |
| DATE DELIVERED: | 31 March 2011 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Cronin J |
| HEARING DATE: | 7 March 2011 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT WIFE: | Mr Burnside QC with Mr Edmunds |
SOLICITOR FOR THE APPLICANT WIFE: | Hallett West |
| COUNSEL FOR THE 1ST RESPONDENT HUSBAND: | Mr North QC |
| SOLICITOR FOR THE 1ST RESPONDENT HUSBAND: | Belleli King & Associates |
| COUNSEL FOR THE 2ND, 3RD AND 12TH RESPONDENTS: | MS Loughnan SC with Mr Watts |
| SOLICITOR FOR THE 2ND, 3RD AND 12TH RESPONDENTS: | Altus Lawyers |
| COUNSEL FOR THE 4TH AND 8TH RESPONDENTS: | Mr Geddes QC with Mr Barbayannis |
| SOLICITOR FOR THE 4TH AND 8TH RESPONDENTS: | Voitin Lawyers |
| COUNSEL FOR THE REMAINING RESPONDENTS (CORPORATE ENTIES) Referred to in Annexure to these reasons: | Mr Denton SC with Ms Djohan |
| SOLICITOR FOR THE REMAINING RESPONDENTS (CORPORATE ENTIES) Referred to in Annexure to these reasons: | Natalie Rompotis |
Orders
That the application in a case filed on 7 March 2011 by Mr P Iphostrou, Mr J Iphostrou and P Pty Ltd in its own capacity and as trustee for the Iphostrou Family Trust is dismissed.
That the final hearing of the wife’s application (as amended) filed 25 November 2010 be fixed before me to commence on 14 June 2011 at 10 am.
AND IT IS NOTED THAT all outstanding interim issues are otherwise already listed for hearing at 10 am on 28 April 2010.
IT IS NOTED that publication of this judgment under the pseudonym Iphostrou & Iphostrou (No 4) is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 8731 of 2009
| Ms E Iphostrou |
Applicant
And
| Mr S Iphostrou |
Respondent
REASONS FOR JUDGMENT
A further application that I recuse myself was made at the directions hearing in these proceedings on 7 March 2011. This application was made by three respondents who had not been present when I heard a recusal application on 15 February 2011. I dismissed the first application and in so far as the earlier applicants’ submissions are sought to be relied upon by senior counsel in this application I refer to my earlier reasons for judgment: see Iphostrou & Iphostrou and Ors (No 2) [2011] FamCA 84.
Senior counsel for the three respondents in the current application adopted the submission of the earlier applicants but also took a different approach.
Having considered the matters, I again decline to disqualify myself from hearing the substantive proceedings.
Senior counsel for the second, third and thirteenth respondents provided an outline of submissions and spoke to them. I shall address those matters below. Before doing so, I have set out the approach I have taken in this determination.
In British American Tobacco Australia Services Limited v Laurie (2011) 85 ALJR 348 (BATAS) the majority, Heydon, Kiefel and Bell JJ set out the apprehended bias test as follows (at 139):
It is fundamental to the administration of justice that the judge be neutral. It is for this reason that the appearance of departure from neutrality is a ground of disqualification. Because the rule is concerned with the appearance of bias, and not the actuality, it is the perception of the hypothetical observer that provides the yardstick. It is the public’s perception of neutrality with which the rule is concerned. In Livesey it was recognised that the lay observer might reasonably apprehend that a judge who has found a state of affairs to exist, or who has come to a clear view about the credit of a witness, may not be inclined to depart from that view in a subsequent case. It is a recognition of human nature.
Their Honours went on to observe that trial judges were frequently required to make rulings excluding irrelevant and prejudicial material from evidence. Their Honours said (at 140):
Routine rulings of this nature are unlikely to disqualify the judge from further hearing the proceedings. This is not a case of that kind. It does not raise considerations of case management and the active role of the judge in the identification of issues with which Johnson was concerned.
However, as their Honours then said, the interlocutory determination of the trial judge in BATAS did not fit into the category of a routine ruling or active judicial intervention in the identification of issues. That would otherwise normally not be a matter for disqualification. What was being considered by their Honours was an impression:
…reasonably conveyed to the fair-minded lay observer who knows that [the trial judge] has found that BATAS engaged in fraud and who has read his Honour’s reasons for that finding.
It is critical that the fair-minded lay observer had read the reasons for the findings. It is also important for the lay observer to consider the nature of the interlocutory proceedings and the discussion there taking place. In BATAS, there was a previous finding by the same trial judge as to fraud and the same issue arose in completely new proceedings with a different plaintiff. The fair-minded lay observer would have had to have considered the sequence of those proceedings.
The High Court in BATAS (at 145) noted that in the “circumstances of this unusual case” a reasonable observer might possibly apprehend that at the trial of the matter the court may not “move its mind from the position reached on one set of materials even if different materials were presented” and that bias on the part of the trial judge might reasonably be perceived to arise. It was on that basis that the majority of the High Court in BATAS distinguished Johnson v Johnson (2000) 201 CLR 488.
Therefore, the question that remains to be answered in a disqualification application for apprehended bias in the form of prejudgement is whether the lay observer might entertain that reasonable apprehension that the judge might not bring an impartial and unprejudiced mind to the issues to be determined. The lay observer must be informed but the bar is not a terribly high one. It is a matter of impression. Despite that, the element of reasonableness is still very important: see Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70.
Under the heading of “Common Issues”, senior counsel for the applicants in this recusal application submitted that I had adjudicated on matters that would “also be in issue in the s 106B application”. She set out the common issues as follows:
(a)the credibility of the husband;
(b)the credibility of the wife;
(c)the admissibility of documents that were obtained by the wife by reason of the execution of the Anton Piller Order (Anton Piller Documents) and her daughters’ copying of F Group documents (USB Stick Documents);
(d)the entitlement of the wife to assets in F Group entities;
(e)the entities that controlled the F Group;
(f)the entities that had an interest in the F Group;
(g)the transactions, dealings and documents in connection with the husband to ceasing to act as a director of F Group entities and P Pty Ltd;
(h)the transactions, dealings and documents in connection with the husband divesting himself of shares in the F Group entities and P Pty Ltd.
It was also submitted that the admission of the “illegally obtained evidence” was “against a background” in which I had heard and determined ex parte, an Anton Piller application. The fair-minded lay observer must also be aware of that Anton Piller order but also that it was an interlocutory order without findings of credit and based on very limited evidence.
Senior counsel for the three applicants referred me to four decisions not previously considered in the earlier recusal application. Those decisions now require consideration.
In Australian National Industries v Spedley Securities (in Liq) & Ors (1992) 26 NSWLR 411, the New South Wales Court of Appeal was divided about the outcome of an apprehended bias application. In interlocutory proceedings, the trial judge in making orders, said in his reasons for judgment that he was critical of the recollection, of the credit and of the commercial conduct of the parties. When the trial judge was asked to decline to continue to hear the complex commercial litigation, his Honour refused. Kirby P noted the unequivocal findings in which the trial judge rejected the oral evidence of certain witnesses. His Honour referred to the “damning” findings of credit and said (at 416):
The finding that Mr Maher knew the purpose and reason for the transaction of 31 October 1987, which is the subject of Spedley Securities Ltd’s claim against Mr Maher (and Australian National Industries Ltd), is central to the success of that claim. It is contested by Mr Maher. It is difficult to see how Mr Maher could possible succeed in his defence on that point before [the trial judge] unless his Honour could be persuaded (contrary to his earlier strongly expressed findings) to change his opinion concerning Mr Maher’s credit and about the evidence earlier rejected by him.
Because of the findings of the trial judge, Kirby P felt that a reasonable and fair-minded observer would have concluded that the trial judge might possibly be affected by the earlier “strongly expressed opinions”.
In his Honour’s reasons, Mahoney JA (at 435, citing Vakauta v Kelly (1989) 167 CLR 568, at 575 to 576 per Dawson J), observed that prejudgment as opposed to bias “refers more to the fact or suggested likelihood that, because he has once reached a conclusion upon an issue of fact or credit one way, a judge will subsequently decide the same issue in the same way”.
His Honour (at 431) referred to the trial judge having to deal with the same or similar issues in successive proceedings, having made findings of fact and credibility. His Honour observed (at 438):
In my opinion, four things emerge from the decision in Livesey and the cases which have succeeded it: (a) the disqualification of a judge for apprehended pre-judgment depends on form rather than substance; (b) whether there is an unacceptable appearance of pre-judgment is to be decided, not according to likelihood, but according to possibility; (c) it is to be judged, not according to what the court and the parties know, but according to the impressions of a lay person who does not know the facts; and (d) there will be an unacceptable appearance of pre-judgment if the judge has previously dealt with the issue of fact or credibility which is before him in the instant case.
Mahoney JA noted (at 439) in relation to (b) that:
There is, in principle, a distinction between an apprehension that a judge might not be impartial and an apprehension that he will certainly, will probably, or will likely not be impartial. It is, as conventionally understood, the first of these which has been accepted and acted upon in this Court.
His Honour referred to Livesey v New South Wales Bar Association (1990) 170 CLR 70 (at 289 to 299) and stated that:
What is in issue in the present case is the appearance and not the actuality of bias by reason of pre-judgment. The reasonable observer is to be presumed to approach the matter on the basis that ordinarily a judge will so act as to ensure both the appearance and the substance of fairness and impartiality.
Mahoney JA (at 442) stated in relation to (d) that:
…a previous decision of the same fact or upon the credibility of a relevant witness will create such an apprehension, normally if not inevitably. The effect of the decisions is, in my opinion, to indicate the effect of such a decision in the assessment of the apprehension of partiality by the ordinary person.
In the present case, the matters upon which decisions have been or will be made are not merely peripheral: they are at the heart of what, in the subsequent cases, the court will be required to determine.
His Honour then said (at 442 to 443):
If prior decisions of fact or credibility are to be seen as of such importance in creating the apprehension on which the principle is based, these prior decisions are decisions on matters which, being at the heart of the issues, must have particular force in creating such an apprehension.
After considering the remaining authorities referred to by senior counsel, I shall turn to whether there are any findings of fact or credibility of importance that I have made such as to give an impression to a reasonable fair-minded lay observer that if the same issues arose in the substantive proceedings an apprehension of prejudgment would arise.
In Southern Equities Corporation Ltd (in Liq) v Bond [2000] 78 SASC 339, a similar situation arose to that in Spedley. The trial judge was required to determine a pre-trial application for a Mareva injunction which required consideration of a number of matters including; whether the plaintiffs had a substantial cause of action against the defendants, whether the plaintiffs had demonstrated a sufficiently arguable case to justify the relief sought, whether there was a concern that if the plaintiffs were successful they would not be able to have the judgment satisfied and whether it was just and convenient to make such an order. Olsson J (with whom Bleby J agreed, Williams J in dissent) noted (at 349) that:
Such an exercise may well involve issues of credibility. It almost inevitably requires the making of specific findings of fact on the evidence available. It follows that, even if those findings are expressed to be only provisional, they may, quite reasonably and naturally, engender an apprehension of pre-judgment as to other issues at trial, if the findings are made by the trial judge. Much, of course, will depend upon the precise nature of the findings and the manner in which they are expressed.
The trial judge found (in the words of Olsson J at 351):
It contains what are expressed to be absolute findings of fact and also conclusions that:-
•John Bond and Ms Caboche acted improperly and not in the best interest of Carindale; and that
•they breached their duty as directors of that entity by disbursing profits made by Carindale, in effect, to members of the Bond family, so as to render the profits of the joint venture irrecoverable.
Olsson J commented that the findings made in relation to the issues were highly adverse to the appellants in a case in which their credibility and probity arose as a paramount consideration. His Honour pointed to the fact that all of the findings which were at the centre of the dispute between the parties went directly to the credit of them as well as the propriety of their conduct. The substantive proceedings between the parties revolved around credit and conduct. Olsson J then said (at 351 to 352):
It is an inescapable conclusion that the hypothetical, fair minded lay observer, particularly contrasting the two modes of expression employed by the learned judge on successive occasions, would be likely to apprehend that, such were the positive conclusions expressed on 20 October 2000, [the trial judge] might not approach a later assessment of the credibility and conduct of the appellants without a significant level of pre-judgment.
. . .
The dilemma with which [the trial judge] was faced was that, although he was dealing with interlocutory applications on a limited range of evidence, the very nature of those applications demanded certain positive findings of fact and a consideration of alleged perjury on the part of both appellants. Unless those findings were heavily qualified as to their provisional nature, the almost certain consequence was that they would lead a fair minded lay observer to a conclusion that the judge would necessarily come to the trial proper with a mind-set adverse to the appellants, in fundamentally important respects.
In such interim proceedings, the findings were necessary to found the orders, and the disqualification of a judge in those circumstances was a necessary corollary. However, Bleby J said (at 368):
In particular, it should not be assumed that, merely because a judge has been responsible for the pre-trial case management of a particular case and will obviously have made decisions adversely affecting one party or another, the judge is necessarily precluded from conducting the trial. Indeed, there would be few interlocutory applications, a decision on which would be likely to give rise to a reasonable apprehension of bias. This is particularly so because most contested applications are decided on affidavit evidence where either the facts are not in dispute or where, as in the case of an interlocutory injunction, the judge merely has to be satisfied that the facts deposed to raise a serious question to be tried. Usually, findings on such issues will be cast in language which could not possibly found a successful submission of apprehension of bias.
Having said that however, Bleby J went on to state (at 371) that:
In effect, his Honour’s conclusion was that the payment by Dampier was a sham, and a means of providing cash benefits directly or indirectly to some of the defendants. It was those transactions, as they were characterised by [the trial judge], that gave rise to his Honour’s apprehension that the remaining assets of Carindale might be dissipated and not be available to satisfy any judgment obtained by the plaintiffs.
Those findings must now be judged against the issues of fact to be litigated in the action, as revealed by the pleadings.
The findings of the trial judge were central to the allegations namely that there was a conspiracy and that was the key issue to be determined at trial.
Bleby J observed (citing Livesey v NSW Bar Association (1983) 151 CLR 288 at 300) that his Honour had “expressed clear views about a question of fact which constitutes a live and significant issue in the subsequent case or about the credit of a witness whose evidence is of significance on such a question of fact”. The Full Court ultimately found it was a case where disqualification had to follow.
In Kwan v Kang & Ors [2003] NSWCA 336, the New South Wales Court of Appeal considered the refusal by a trial judge to disqualify himself for apprehended bias after making findings of an absolute and unequivocal nature in an interlocutory hearing.
One of the grounds of appeal raised in Kwan v Kang & Ors was that the trial judge made a determination as to the admissibility of a number of documents and made findings relating to that determination. Those determinations and findings gave rise to a reasonable apprehension of bias in relation to matters in issue to be resolved at trial.
One of the matters in issue before the trial judge was whether a loan transaction and a mortgage constituted a sham and involved fraud. The trial judge concluded on examination of the documents that a substantial number were “in furtherance of the commission of a fraud” or involved a “deliberate abuse of a power”. His Honour stated that “I then conclude that there are reasonable grounds for finding that fraud in the sense of alienation of property with intent to defraud creditors did occur”. The trial judge later revised his reasons for judgment to state that “there are reasonable grounds for concluding that a substantial number of [the documents] are ‘in furtherance of the commission of a fraud’ or involve ‘a deliberate abuse of a power’”.
The Court of Appeal referred to the “well-settled” test articulated in Johnson v Johnson (2000) 201 CLR 488 and Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 which the High Court stated was to be applied in Australia to determine whether a judge is disqualified for reason of apprehension of bias in the form of prejudgment.
The test stated in Ebner and Johnson was affirmed by the Full Court of this Court in Strahan & Strahan (Disqualification) [2009] FamCAFC 204 at paragraphs 3 and 4. This test is set out in paragraph 4 of the reasons for judgment in the first recusal application: see Iphostrou & Iphostrou and Ors (No. 2) [2011] FamCA 84 at paragraph 4.
The Court went on to observe the importance of the appearance of impartiality on the part of the adjudicator but noted that:
77.Despite the importance of the appearance of justice being seen to be done, there is a strong need for courts to apply realistic criteria in considering whether a reasonable apprehension of bias has been established. This is particularly so when dealing with a disqualification application based on what is said to be pre-judgment by a judicial officer. This has often been stressed.
The Court emphasised that:
82.While the test for apprehended bias by reason of pre-judgment is based on what may be regarded as a fairly low threshold of satisfaction, namely, “whether a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial and unprejudiced mind” to the issue, the element of reasonableness needs to be stressed. In Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70 at 100 Gaudron and McHugh JJ pointed out:
A reasonable bystander does not entertain a reasonable fear that a decision-maker will bring an unfair or prejudiced mind to an inquiry merely because he has formed a conclusion about an issue involved in the inquiry.
In addition to these comments, importantly the Court stated that:
86. It is not unknown for judges to make findings on an interlocutory issue and to express those findings in a way that indicates that they have come to a final conclusion. If that conclusion is as to a significant issue on which the ultimate result of the trial depends, and further evidence is still to be led and final addresses are still to be made, the likely consequence is that the judge concerned will have to disqualify himself or herself.
87.The reason for this is that a finding expressed in terms of finality, when made at an interlocutory stage, will usually give the impression that the judge’s mind is made up. If the judge’s mind is made up before evidence and final addresses are complete, it will mean that a conclusion has been unfairly arrived at. There is then likely to be an apprehension that, when the time comes to give final judgment, the judge might not be impartial or might be prejudiced against the party who was unsuccessful in the interlocutory judgment. It will then not merely be an apprehension that the judge will decide the case adversely against that party.
As such, the importance of this decision in relation to the matter currently before the Court is the focus on the findings “expressed in terms of finality” indicating an impression that the relevant judge’s mind is made up. Those unequivocal findings must be key to the issue which the fair-minded lay observer is aware are central to the matters at issue in the substantive proceedings.
In Nicholls & Ors v Michael Wilson & Partners Ltd [2010] 243 FLR 177 the question was once again before the New South Wales Court of Appeal. This decision, although handed down in September 2010, is currently the subject of a grant of special leave to the High Court made on 11 February 2011: see Michael Wilson & Partners Limited v Nicholls & Ors [2011] HCATrans 28.
The appellants in Nicholls & Ors v Michael Wilson & Partners Ltd, brought two recusal applications before the primary judge which were both dismissed. Basten JA discussed the fictitious objective “fair-minded lay observer” as explained in Allsop P’s reasons in British American Tobacco Australia Services Ltd v Laurie [2009] NSWCA 414 and in Johnson v Johnson (2000) 201 CLR 488.
However, it should be noted that although the majority of the High Court in BATAS affirmed Allsop P’s reasoning, Gummow J at paragraph 101, found that his Honour had incorrectly applied the test in Briginshaw v Briginshaw (1938) 60 CLR 336 in attributing to the lay observer a conclusion that the judge was satisfied “of dishonesty to a degree that no further evidence could dissuade the court from that conclusion.” It should also be noted that the majority in BATAS, at paragraph 145, distinguished Johnson v Johnson.
In relation to the balancing of competing considerations to be evaluated by the primary judge in a recusal application Basten JA highlighted the importance of upholding the public’s confidence in the administration of justice and the impartiality of judicial officers in determining matters before the courts as weighted against the efficient administration of proceedings before the courts. His Honour observed (at 180):
The answer in a particular case will depend on the nature of the decision being made and the surrounding circumstances, a position which gives rise to important questions as to the knowledge and understanding of the proceedings which must be attributed to the hypothetical fair-minded lay observer.
The facts surrounding the judgments that are the subject of the grounds of appeal relating to apprehended bias in Nicholls are quite extraordinary in terms of the nature of the ex parte proceedings held in closed court, the manner in which the events became known to the appellants, and the confidentiality regime implemented in relation to the proceedings including the retention of documents, orders, transcripts and files in the chambers of the trial judge. In that respect Basten JA set out (at 197 to 200) the factors and considerations relevant to determining whether a fair-minded lay observer would reasonably apprehend bias and prejudgment on the part of the trial judge and concluded (at 201) that:
The cumulative effect of these considerations leads to the conclusion that a fair-minded lay observer, appraised of the facts, might well apprehend that the primary judge might not be able to bring an open mind to the issues raised in the trial, and particularly an assessment of the credibility of Mr Wilson on the one hand and Messrs Nicholls and Slater on the other. I would hold that view and do not see any reason to think that the fair-minded lay observer would not share that view. Finally, the judgments given by the primary judge following the trial tend to enhance rather than diminish, the apprehension that would otherwise arise.
Specifically in relation to the final point, his Honour (at 194) indicated that the primary judge’s reasons would fail “to diminish any concerns that the lay observer might have had arising from the earlier proceedings… It is probable that the manner in which this complaint was dealt with might have confirmed pre-existing fears that his Honour might not approach the substantive issues with a mind free from prejudgment”.
Lindgren AJA and Young JA agreed with the reasons of Basten JA on the issue of apprehension of bias. In relation to the secrecy surrounding the interlocutory orders made, Young JA commented (at 205) that:
I agree with the proposition that merely because a judge conducts pre-trial conferences or hears interlocutory motions in proceedings does not mean that he or she must recuse. However, if that judge has seen material which could have relevance in the case which has been withheld from one of the litigants, and a fortiori if that judge makes a series of interlocutory orders ex parte which can only be justified on the basis of accepting the truth of statements made by one of the parties whose credit is to be in issue, that judge must almost always not allow himself or herself to preside at the trial.
. . .
A fair-minded lay observer would conclude that a judge who had been satisfied that the orders made in interlocutory proceedings were correct, more likely than not had already accepted the proposition that the evidence on which the orders were made was truthful and credible and so has already made a firm decision on the vital question of whose evidence was to be accepted.
Indeed it may go further, and, I suspect that it did so in this case, that by reason of continually accepting the evidence of one side (some of which he has agreed is not to be disclosed to the other side), the judge has put himself into the mindset of accepting that that witness is the “good guy” and thus the opponent is otherwise.
Young JA also highlighted (at 205) that it was a concern that there were continued suggestions of the connection between the appellants and international financial criminals whereas the plaintiffs, who sought the interlocutory orders, were “pure and honourable”.
The authoritative statements in Nicholls relating to interlocutory determinations are helpful. However, the extraordinary conduct involved in those proceedings and unusual facts of that authority, notwithstanding the current appeal to the High Court, place Nicholls in a position of limited precedential utility in relation to the current matter before the Court.
Further even in applying Nicholls, a reasonable fair-minded observer would not conclude, from what I have stated in the relevant proceedings or from the reasons for judgment in relation to the ruling as to the admissibility of the “illegally obtained” documents (see Iphostrou & Iphostrou and Ors (No. 4) [2010] FamCA 1183) or the litigation funding application (see Iphostrou & Iphostrou and Ors [2011] Fam CA 20) that I have created an impression that I will continually accept the evidence of one party (in this case, it is posited, the wife) as “truthful” or “pure and honourable” and the evidence of the other parties as otherwise.
In the remaining three Court of Appeal authorities discussed above not only are the findings unequivocal and critical of a particular party, with respect to the findings of fraud, abuse of power, improper commercial conduct and breach of relevant duties stated by the trial judges, but they were findings central to the same issues that were to be determined in the substantive proceedings. Accordingly, each of those decisions is distinguishable from the current application before the Court. As in BATAS the findings in the authorities referred to were expressed without “qualification or doubt” and were based on an “actual persuasion of the correctness of that conclusion”. It is that impression, conveyed to a reasonable fair-minded lay observer, by a definitive finding of a judicial officer, with a lack of qualification, that the High Court was identifying in BATAS, and that the various Courts of Appeal were identifying in interlocutory proceedings in Nicholls, Spedley, Southern Equities and Kwan v Kang & Ors.
However, in discussing the above authorities I note that recently Finn J in the Full Court judgment of Dunwell & Dunwell [2011] FamCAFC 2 (at paragraphs 20 to 24) stated the test for disqualification on the basis of apprehended bias. It should be noted that this decision was decided before BATAS. This is the test as applied by the Full Court in Strahan & Strahan (Disqualification) [2009] FamCAFC 204 (at paragraphs 3 and 4).
Her Honour stressed that the test is an objective one, not based on the party’s apprehensions, but that of a “fair-minded lay observer”. Finn J concluded that although in her Honour’s view the primary judge’s reasons in response to the recusal application may have been inadequate, it did not give rise to a reasonable apprehension of bias on the part of a fair-minded lay observer. Her Honour observed that:
51. When regard is had to the observations concerning modern judicial practice made by members of the High Court in Johnson (in the paragraph ([13]) which I earlier cited), I consider that his Honour’s questions and observations, when read in context, concerning the strength that the letter of 11 May 2009 appeared to give to the case for the restraining order against the wife’s solicitors, and the apparent reliance, at least at that stage, by the wife’s side only on her affidavit, did not exceed the bounds of legitimate questions and observations by a judge (as referred to in paragraph 13 of Johnson). In these circumstances, the fictional lay observer, whose position is to be understood in light of what is said in paragraph 13 of the High Court decision in Johnson, could not reasonably apprehend that his Honour might not bring an impartial mind to the resolution of the case for the restraining order in relation to the wife’s solicitors. (See also the observations in Concrete Pty Ltd v Parramatta Design and Developments Pty Ltd (2006) 229 CLR 577 of Gummow ACJ at [4] and Callinan J at [173] to [180].)
In that decision Thackray J’s views differed from those of Finn J in relation to the adequacy of the trial judge’s reasons. His Honour noted that:
191.It is important to keep in mind this was an interlocutory dispute in proceedings the trial Judge properly identified as having the potential to give rise to “satellite litigation”. As his Honour said, such litigation:
…uses a significant amount of court time. That means other cases waiting to be heard experience longer waiting times. In a time where the judicial resources of the Court are stretched enormously those waiting times become quite unacceptable to most litigants.
Interlocutory applications in “big money cases” tend to create voluminous affidavits. The material to be considered to determine the dispute tends to be far greater than that required by the remainder of the Court’s work. There is created, by the documentation filed in such applications, a view that no expense has been spared in the preparation of the case and/or the impression that the amount of legal costs incurred is almost irrelevant, given the size of the asset pool available for distribution between the parties. The consequence is that the time required hearing and determining the dispute is far longer than ought to reasonably be the case. Another fact which adds to the workload of a judge hearing such applications is the constant unstated threat of an appeal. Judgments delivered in such cases tend to be longer than usual and address more law than usual.
192.Although it is necessary that the parties and the appellate court be able to discern the rationale of the decision, it cannot be expected that textbook judgments will be produced in every interlocutory dispute. This is especially so in an environment in which, as his Honour observed, judicial resources are “stretched enormously” and litigants justifiably complain about waiting times. Courts cannot function at the level that once may have been expected when they are not provided with adequate resources. Faced with such a dilemma, busy trial judges will inevitably direct their energies to the most pressing cases, of which the present – involving the division of apparently large wealth – could hardly be said to be one.
Having considered the application of BATAS, the authorities of the various Courts of Appeal referred to by senior counsel and the most recent Full Court authority of this Court in relation to apprehended bias I turn then to the two judgments of mine which are under consideration.
In respect of the evidentiary ruling made on 13 December 2010 in which I permitted the wife to rely upon evidence that was “illegally obtained”, I observe that the facts giving rise to the need for the order were not controversial. I pointed to the fact that the wife had asked her 16 year old daughter to make copies of files which were subsequently copied onto a USB stick and given to the witness. The witness said that the USB stick contained over 900 documents but I observed that only a very small number of documents were used. I pointed to the husband’s response to the material saying that he was not the author of the document nor was any document prepared at his request, direction or instruction. I said that he had not ratified or confirmed the documents. I then pointed to the fact that the wife argued that the husband was the owner of the business and had divested himself of those interests to defeat her claim but the husband’s position was that the parties had separated many years before and a variety of transactions had occurred which established that he had no interest in the business. I then ruled, in Iphostrou & Iphostrou and Ors (No. 4) [2010] FamCA 1183, that:
15. Thus, the information obtained by the wife might be of some significance in establishing the position contrary to that put by of (sic) the husband.
I observed that the husband argued the same point that was put by senior counsel for the applicants in these proceedings namely that by admitting the evidence I was turning a blind eye to an appalling situation in which a parent was encouraging a child to commit a crime and damaging the relationship with the other parent. I then observed:
24.What enables me to be less concerned in this case about the public interest is that I have previously made orders joining the various entities; thus, this controversial evidence may be available anyway. That is a basis to admit the evidence.
I then observed that the public interest point was not a strong argument and explained the positions as both parties put them and indicated that the probative value as I saw it was that it might lead to a trail of inquiry.
I then observed:
29.The tainted evidence suggests the [F Group] had somehow acquired the interests of a company known as [H Shipping Group] which had a very large annual turnover and significant capital value. The official company record shows no such ownership. There may be a plausible explanation for all of that which may not be apparent from disgorged records or public record documents.
30.The same two documents that is, the tainted document and the one produced by the husband, prove or refute, depending on which is accepted, that the business owes the husband millions of dollars. It is these conflicts that make me find that it is important evidence. That importance is a basis to admit the evidence.
. . .
35.The determination is a balancing act. Having excluded the public interest issue, I consider this is an unusual case in which the evidence should be admitted because the desirability of admitting it outweighs the undesirability.
Before looking at all of those matters, I turn to the earlier judgment which related to the litigation funding issue.
In that case, I observed that I found sufficient evidence to enable me to make what was known as a dollar-for-dollar order from the period from that day until trial on the basis that the husband had previously had his expenses paid from a resource and the expenses were significant enabling me to say that he had a financial resource. I covered all of the points raised by both parties and importantly said that the husband answered all of the allegations of the wife. I then observed, in Iphostrou & Iphostrou and Ors [2011] FamCA 20, that:
43.One significant dispute between the parties related to whether the various corporate entities owed the husband money. The wife pointed to a document obtained from the computers of the entities showing that he was owed millions of dollars. The same document but formally completed and lodged for corporation purposes, not only showed that he did not have such an asset but that he owed the corporate entities money. No explanation was given as to why that might be so and no doubt it will be the subject of intense scrutiny and ultimate cross-examination.
A reasonable fair-minded lay observer acquainted with the fact that this was an interlocutory hearing would have noted what I said in paragraph 44 of my reasons. Those reasons were:
In any situation of an interlocutory nature where the facts are controversial and in dispute, a court cannot make findings of fact. Findings of fact form the basis upon which orders are made within jurisdiction. There are many disputed facts here all of which are contained in affidavits that currently remain untested.
In respect of the outcome of that interlocutory proceeding, I said at paragraph 49 that I could not treat the assets of the corporate entities as those of the husband for the purposes of making a litigation funding order based on s 80 of the Act. I indicated at paragraph 56 that there was a prima facie case for the wife to have an entitlement under s 79 which justified an order for costs because of the complexity of the problem. That arose by virtue of the fact that the husband had previously had his legal expenses paid.
There were no findings as to credit and certainly having regard to the expressions I used in paragraph 56 of those reasons, no findings that were unequivocal or of a final nature.
The reasonably informed fair-minded lay observer would know that these were interlocutory proceedings. That hypothetical person also would be acquainted with the basis upon which the wife argues the substantive proceedings. Those proceedings are issued under s 106B of the Act. The question is whether various transactions were undertaken by the husband and others which had the effect of defeating the wife’s claim to a property settlement. The observer must know that the wife has to prove those transactions. Absent any findings as to credit, it is hard to see how the fair-minded lay observer could conclude that I had adopted a position of prejudgment in relation to the wife’s case. Quite the contrary, there was considerable comment made by senior counsel for the corporate entities that the transactions sought to be set aside by the wife could not achieve that which she sought to do in putting assets back in the hands of the husband and the wife.
Finally therefore I turn to the submissions of senior counsel. In respect of common issues in paragraph 19(a) and (b), no such findings have been made. The reasonable fair-minded lay observer would know that in respect of the admissibility of the evidence, the ruling was limited to the interlocutory issue which had nothing to do with the substantive issue to be determined.
The matters set out in paragraph 19(d)-(h) are clearly matters in issue and the reasonable fair-minded lay observer would know that there was no determination made in either of the two judgments to which I have referred. I do not accept that an independent fair-minded lay observer might reasonably consider that any prejudgment has arisen.
Accordingly, the application is dismissed.
I certify that the preceding Sixty Six (66) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 31 March 2011.
Associate:
Date: 31 March 2011
ANNEXURE
PARTIES REPRESENTED BY MS ROMPOTIS
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